At a client management roundtable I facilitated, the participants emphasized the lack of direction and communication. Their sentiments were echoed and validated by an employee survey. When asked to perform a financial assessment on the cost of poor communication and direction, within two minutes these leaders had calculated over $12 million in costs or 25% of the company’s gross revenues.

Is this high cost an exaggeration? Not at all. Their experience is typical.

Through the years I’ve invited clients to assess the cost of being off-purpose. Consistently, it is a breathtaking percentage of revenues. Here’s why: every line item on the financial statements is affected. The effect, however, is mostly indirect so the true cost is out of sight on the typical performance metrics.

Broadly insufficient direction and communication reflect on the top leaders. Experience tells me it isn’t that the top leaders won’t direct or communicate, it is that they don’t know what to communicate.

Direction and communication are deep strategic matters residing in the office of the CEO and C-suite.

Purpose, vision, missions, and values form the basis of core strategy that informs the business plan. Generalities instead of strategic clarity muddy direction and communication. When the leadership and management team are fuzzy, then the supervisory and frontline people are left guessing what to do.

Interestingly, those who “guess” better than most, get promoted. They imagine being in management will give them the opportunity to manage better than they were managed. In fact, they soon discover they’re just closer to the source of the problem and are even more exposed to the risks of managing through the mud. This can lead to a feeling of being squeezed between upper management and frontline workers.

On one hand, one wants to be loyal to their employer; yet, on the other hand, it is really hard to defend dumb policies and procedures with no basis of strategy or logic. In top management’s defense (to some degree), it is a fine line to walk between leading and managing versus dictating and micromanaging.

If you are the CEO, figure out your strategy and direction and commit yourself and your team to being true to it. Sell it consistently with great internal communication and reward right behaviors.

One of the great movie lines of all time comes from the movie Cool Hand Luke starring Paul Newman. The chain gang prison captain says to Luke after rendering a whipping on him, “What we’ve got here is … failure to communicate.” Watch Video.

Indeed, we do have … failure to communicate. Imagine being in my shoes and seeing huge gains and savings to be had in a business, yet the leader is out of the comfort of his or her experience or they assume they are communicating.

Expecting others to be mind readers is frustrating for everyone.

Purpose is the beginning of clarity in life and business. It pays big dividends to be on-purpose.